CRISIL undertakes negative rating action on 80 companies due to weakening financial situation

Our Bureau Mumbai | Updated on March 26, 2020

Earlier, CRISIL said in a credit alert that credit pressure on India Inc was intensifying

In a clear indication that the ongoing economic slowdown combined with the impact of the coronavirus epidemic has hit India Inc hard, CRISIL has reviewed 120 corporates most-affected by the situation. the companies belonging to sectors such as airlines, hotels, tourism, malls, organised brick & mortar retail, multiplexes, and restaurants. Of these, 80 companies have been downgraded or put under ‘ negative watch’ by the rating agency.

"The rise in Covid-19 cases and the 21-day lockdown announced by the government would cause large-scale disruption to businesses," CRISIL said in a statement.

Earlier on March 13, 2020, CRISIL had said in a credit alert that credit pressure on India Inc was intensifying.

The actions are largely driven by near-term challenges to liquidity, which could impact financial flexibility. These are largely small and mid-sized companies, and some large ones with leveraged balance sheets that are more vulnerable to a sharp slump in cash flows.

"CRISIL will continue to engage with these clients over near to medium term. On the other hand, we foresee 39 companies surmounting the stress because of balance sheet liquidity, unutilised bank lines, and other external financial flexibilities. These companies are not expected to face liquidity issues when it comes to operating expenses and debt repayments in the near term,"it added.

Recently, a few public sector banks have started offering loans for credits classified as ‘standard’ with a moratorium on repayment and concessional interest rates to tide over cash flow mismatches arising out of current lockdown on businesses. These can offset liquidity constraints to some extent, but revenue-related challenges will continue in the near term.

Published on March 26, 2020

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